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Alice first meets the Hatter at the Mad Tea Party in Alice's Adventures in Wonderland. His opening gambit is not promising: `Your hair wants cutting,' said the Hatter. He had been looking at Alice for some time with great curiosity, and this was his first speech.
As the Cheshire Cat points out, everyone's mad in Wonderland, and it is true to say that all of the characters are eccentric, at least, and if they weren't, then they wouldn't be there. The phrase as mad as a hatter was well known in Lewis Carroll's day, and was a probable inspiration for the character of the Hatter. At the time, many hatters suffered from mercury poisoning.